The Customer Revenge

Harvard Business Review Case Study : The Customers’ Revenge by Dan Ariely (December 2007) As an introduction of this case, a little recall of the facts may not harm anyone. Atida is a 70 year old motor company, producing and selling stylish and innovative cars and they have just launched a new one on the market : the Andromeda XL. The brand has many loyal customers and devoted fans among various clubs and communities.

Jim MacIntire and his colleagues from the customer service department have tried to enhance their operations by implementing various methods : For instance, the company offers comprehensive warranties, a special credit card rewarding customers with presents, and a new call center was implemented a year ago in India in order to answer customers’ phone calls. Despite such improvements, customers keep complaining, sending angry letters to the customer service and customer’s satisfaction seems to fade. As light is shed on these elements, one could wonder what could Atida do to deal with the unhappy customers ?

First and for most, the company should deeply change the way it handles customers’ complaints. They are not ennemies, they have spent a lot of money on one (or several) expensive car(s), sometimes they are truly devoted to the brand and are huge fans of it; Therefore they are entitled to be treated with consideration, especially when the product keeps breaking down (as in the case of a customer named Jessica Long). Thus when Lisa explains that «She must get a life», her attitude towards customers is all wrong.

Futhermore, thinking that a call-center (outsourced far away from the heart of the company and employing people that can hardly speak English) will solve all customers’ complaints, it’s a delusion. It only fosters disatisfaction. Indeed, it seems that the company is acting submissively and passively towards its customers and thus, Atida should develop a strong and active dialogue, thanks to regular contacts with its customers (through surveys or questionnaires, for instance) because many lessons can be learnt from them.

Indeed, in an era where the Internet plays a predominent role in society, it appears that the times when managers and marketers were the only masters on board no longer exists. Nowadays, customers control the brand, can praise it to the skies or bad-mouth it thanks to blogs, social networks and YouTube. The reputation of a company and the image of a brand are no longer managed by marketers only but they are also in the hands of customers since word-of-mouth, bad or wrong, spreads like wildfire on the Internet.

There is no miracle solution for Atida to deal with its customers and one should avoid opting for a Manichaean vision. Some managers may be willing to hierarchise customers according to their Customer Lifetime Value (ie. CLV, the present value of the future cash flows attributed to the customer relationship). Thus, customers like Tom Zacharelli, who have purchased several cars for the past years, that are devoted and loyal to the brand, would receive a better treatment and service (gifts, reimbursements, etc. since their CLV is higher. To the contrary, nothing would be done for customers that keep complaining because there is always something wrong (Jessica Long seems to be a good example of that kind) and are quite costly for the company. Such a classification of customers according to their CLV would be a good solution if word-of-mouth didn’t exist. Its power and the long-term effects arising from it can harm the brand, and make sales dwindle drastically.

Other managers may be willing to try to satisfy all complaining customers, giving all of them nice treatments and compensations as a reward for bad experiences with the cars and the customer service. Their solution would be to forster the idea that the company treats customers on an individual basis and that it cares about them. Thus bad word-of-mouth would turn into good one, and customers would tell their relatives how the company treats them so well and they would become brand advocators.

But think of the costs of such a solution. It might work for a while but it is surely not a long-term solution. As the emphasis is put on these two extreme solutions, the golden means must be found in order to deal with the unhappy customer problem. The solution would be to compare the CLV of each customer (because we know that some customer relationships are more profitable than others) with the «word-of-mouth value» (this can be positive or negative and it is part of the Customer Social Value).

An efficient Customer Relationship Management System shall be able to consider and assess the potential gains and losses for each value, so that and individual response can be found for each complaint. For instance, as I have previously explained, Tom has a high CLV but the value of his bad-mouthing is higher since he probably belongs to a fan community of Atida cars, and since, as a film-maker, he is able to make a really good video to tell people about his bad experience with the customer service and put it up on YouTube.

In this case, in order to avoid huge losses and retain this valuable customer, Atida should do something to smooth over the dispute. Regarding Jessica’s case, her CLV is not as high as Tom’s but further investigations are mandatory to solve the problem : Are her complaints justified ? Is she able to spread a powerful bad word-of-mouth ? What could be the value of such a bad-mouthing ? In Atida’s case, the solution is about giving value balance and assessment of both the Customer Lifetime Value and the Customer Social Value (ie the value of the word-of-mouth).

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